New normal includes work after retirement

BOSTON -- Many people expect to retire around age 65, but research shows that plenty of people older than that rely on paid labor for a good part of their retirement income.

Job-based earnings are roughly 30 percent of the average U.S. retiree's income and upward of 40 percent for those in the highest income quintile, according to Social Security Administration figures. And earnings from work account for one-fifth of income for people age 65 or older in the 30 countries of the Organization for Economic Cooperation and Development.

Whether you work after age 65 will depend on many factors -- whether you have a defined-benefit plan or retiree health insurance, whether you are in good health, whether you can find work. But make no mistake about it: Some of you will work past age 65 and earned income will play a significant role in your finances.

In the United States, 37.8 percent of 65-and-older workers worked full-time year-round in 2008, according to the Census Bureau. That percentage ranged from 51.6 percent in the District of Columbia to 27.4 percent in Wisconsin.

In the United States, 15.5 percent of people age 65 and older participated in the labor force in 2008, according to the Census Bureau. The labor force participation rate ranged from 23.2 percent in Alaska to 11.2 percent in West Virginia.

Only a third of workers age 65-plus are employed full time, according to Census data as of 2008.

"That percentage will grow," said Tim Driver, president of RetirementJobs.com. "Our recent audience research supports today's new reality -- that the majority plan to retire in their 70s, not their 60s."

Of course, this new reality is often a function of need, particularly with the recent downturn, Driver said. "But social norms are fast changing," he said. "Many folks simply want to continue to go to work to engage with other people. It makes them happier and gives them a greater sense of purpose."

But you can't bank on working in retirement. Just 23 percent of retirees said they planned to retire before age 64, but 54 percent actually retired before age 64, according to a recent Employee Benefit Research Institute study. Two oft-cited reasons for that: Health issues arise, or a job loss is followed by difficulty landing a new job.

Still, Nicole Maestas, an economist with Rand Corp. who is also affiliated of the University of Michigan Retirement Research Center, said that many older workers will be able to keep working after age 62, especially given changes she's witnessing among employers. "There's a lot of reason for optimism," she said.

So what can you do to increase you chances of working after age 65? The first step is assessing your career in a way that gives you some indication whether you are more or less likely than average to find a retirement job, said John Nelson, co-author of "What Color is Your Parachute? For Retirement."

"That helps give insight into how realistic those expectations for earned income are," he said.

The second step is taking actions to increase the likelihood of employment. Nelson has crafted a "Retirement Well-Being Model" which you can use to increase your odds of becoming employed after age 65.

Self-assessment aside, Art Koff, chief executive of RetiredBrains.com, said most of the opportunities for older Americans these days are project-based jobs, especially with former employers or companies in their field of expertise.

Besides talking to your current employer, Koff said those nearing retirement and interested in working in some capacity must maintain their network of contacts -- and even expand it if possible. "Many older workers have stopped attending conventions and trade shows and this is a mistake," Koff said.

For those who can't find a job, Koff recommends that you start your own business. In a number of cases these are franchises but a percentage have set up shop to work out of their homes. Not only does this provide some income, but it allows some small-business deductions that they could not take prior to owning a business.

For his part, Steve Vernon of Rest-of-Life Communications doesn't think you should plan on working in retirement -- at least not because you need the income. "I recommend that you save enough and plan your retirement date such that your financial resources will be adequate to cover your expenses," he said.

This means saving more now while you are working, and planning to work later in your current job. But if you're close to retirement or in retirement and you need the income from work, then your only choices, he said, are cutting your living expenses significantly and continuing to look for work.